Peculiarities of foreign economic activity

Many companies not only successfully operate on the domestic market, but also on foreign markets. There are peculiarities of foreign economic activities, i.e. those activities that are associated with export-import operations for the delivery of goods. Commercial transactions of companies located in different countries fall under this definition.

 

What are the peculiarities of foreign economic activity

 

Not only trade operations are included here, although they constitute the main volume. Also features of foreign economic activity are as follows:

 

  • Organizational events of an exhibition nature, which are held in an international format – this is also FEA.
  • Investment projects that link several companies.
  • Joint productions.

 

It is important to take into account peculiarities of foreign economic activity, i.e. to take into account any nuances related to movement of any goods, cargoes across the border.

This specificity means the need to find specialists who can help to draw up a fairly large list of documents quickly and in accordance with the law.

Among the peculiarities of foreign economic activity one can mention the fact that it requires from professionals efficiency in finding foreign partners and arranging negotiations with them. Also specialists discuss deals, evaluate contracts, agreements, track payments. Also they solve all organizational moments and, of course, provide correct filling of declarations.

 

Why VED requires high qualification

Such high requirements for logisticians and other professionals are explained not only by the need to perform many functions. FEA itself is the need to take into account many legal subtleties, including those related to customs legislation, the direct execution of documents. The following table will help to understand it:

 

Knowledge of foreign languagesForeign economic activity is almost always connected with the necessity of oral or written communication in a foreign language. It can be English, Chinese, Arabic etc.
Compliance with a lot of legal formalitiesThis means that the specialist has to fill in a lot of declarations, conclude contracts with data about the buyer, supplier, subject of the contract, price and total amount, packaging, marking, delivery terms, payment terms, claims and dispute resolution procedure

Several parties are involved in FEA and it is important to guarantee full communication between them. If we are talking about concluding a contract with a foreign company, such an agreement must be translated into the foreign language. It must be absolutely identical with the details, information about the counterparties, with the terms, prices and other things.

The need to deal with FEA is the reality of today. Experts agree that globalization will make this process of cooperation between countries even more relevant. Even the ups and downs of the world economy, changes in the political situation and pandemics do not stop the interaction, and in some cases even stimulate it.

 

What kind of participants are involved in foreign economic activity?

 

There are signs that will allow to refer these or those organizations and companies to the participants of external economic activity. Thus, foreign economic activity includes the following participants:

 

  • Intermediaries.
  • Producers.
  • Related companies.

 

As you can see, foreign economic activity is a strict distinction. Intermediaries include joint ventures, trading houses, or specialized government units. Producers are directly the organizations themselves, production shops, corporations engaged in production, organization of transportation.

Among the participants in foreign economic activities, there are also facilitating companies, that is, customs brokers who are directly involved in clearance, assisting the business in achieving its goals. Without such related organizations, it would be impossible to organize FEA and fully engage in entrepreneurship. None of the parties can be excluded without the risk of disrupting the entire chain of interaction.

 

What is FEA in logistics

Very often there are other terms, definitions. For example, VED in logistics means the following:

 

  • Control of cargo movements, transportation.
  • Inventory management.
  • Providing quality services with optimal cost.
  • Control of correctness of filling out documents for customs.

 

As we can see, VED in logistics largely consists of the need to monitor what is happening to reduce or completely level out the risks of loss, damage to goods, property, increase unforeseen costs. And once again it is clear that one of the cornerstones in the activities of logistics professionals will be the optimization of business for the client.

Professionals involved in FEA in logistics should not aim to sell their services in the first place. Unfortunately, this happens if a company cares only about inducing the customer to cooperate. But in fact the primary goal in a professional approach will be to take care of optimizing the customer’s business, reducing costs, ensuring the safe operation of the company.

 

More about types of external economic activity

 

The most common type is foreign trade, i.e. export, import of goods. Deliveries are made by transporting shipments that move by water, air, rail, road, passing through customs posts. But there are also other options, for example, industrial cooperation and financial and credit, currency operations. It is worth comparing them using the table:

 

Currency, financial and credit operations.They mean buying shares, lending to foreign companies. Loans can be both monetary and represent the supply of equipment or the possibility of buying debt. Often joint ventures are created or project financing is carried out
Production cooperationIt represents several producers of goods that create joint products. The main purpose of such associations is to reduce costs by distributing production in different parts of the world, in different countries. Somewhere raw materials are purchased, and somewhere production is started. For example, it is profitable to launch production in Asian countries, because the payroll in those regions is lower, so many global brands, in fact, being Western, move production to the Asian region.

 

In any case, you cannot do without foreign economic activity, the need to pay duties, taxes, collect a full package of documents, so that the activities of the company or a group of merged companies, production is not paralyzed.

 

International cooperation in the field of investments as a kind of foreign economic activity

 

There is another type of foreign economic activity that has become very common recently. It is about international investment cooperation. Organizations and enterprises unite in order to more actively implement products and projects in the foreign market. A classic example can be the cooperation of numerous non-governmental international organizations. Joint-stock companies and some concessions also fall under this category.

Undoubtedly, in the future foreign economic activity will change again, adapting to modern realities. Most likely, new, higher standards, regulations, requirements regulating this sphere will appear. Accordingly, the requirements for specialists involved in logistics will also increase. Even today, it is clear that logistics requires a comprehensive approach from professionals: knowledge of foreign languages, law enforcement practices, precedents, the economic foundations of the functioning of organizations, in-depth knowledge of management, control of the warehouse, the transportation of consignments of goods. Moreover, it is often necessary to think through several interaction schemes at once in order not to waste time in case of force majeure, because logistics is a complex process consisting of several links.

 

The difference between the documents used in foreign trade activities

There is no universal package of documents that will be relevant in all cases. This is also one of the peculiarities of foreign economic activity. So, the following factors influence:

 

  • It affects the conditions under which the consignment of goods will be transported, what it is.
  • Consideration is given to whether the shipment is for export or import.
  • The purposes of transportation are taken into account, as well as the requirements for passing through customs procedures in connection with the specifics of the cargo.

 

Accordingly will be formed and the package of necessary documents, such as certificates from banks on the opening of accounts, certificate of state registration, the registration in the Unified Register, the certificate confirming the registration on the tax register, proof of payment of customs duties, excise, taxes. Insurance confirmation, invoices, declarations of conformity and dozens of other names are also needed. Some of them are in the public domain, they can be filled out in advance in online format, which partially facilitates the work.

 

What quality means in FEA

 

Quality will not be an abstract concept, but implies strictly defined criteria. Obligatory conclusion of a contract, the calculation of the transport scheme, full legal support in the passage of customs clearance, control of the unloading of goods, reconciliation, tracking movement, the organization of storage in temporary warehouses and other links of the logistics. Professionals engaged in logistics, and must be aware of such nuances, of which many customers are not aware at the time of the conclusion of the contract. For example, the logistician clearly knows what trucks are, how many pallets they contain, and what their height is. Thus, there are Europallets, or industrial, that is, industrial. They differ in height, dimensions. Some of them can be put on top of each other, while others are placed only horizontally and fixed. Sometimes there is an overload of a vehicle, such as a truck, so we have to consider the need for additional transport.

It seems that it is only working points, small nuances, but they are really many, and each of them affects how smoothly will be organized logistics, customs clearance and other components of foreign economic activity.

 

Features of the search for a performer in FEA

 

Although the competition in this segment of the market is great, but not always possible to immediately reach the responsible executor. A professional broker conducts its activities on the basis of permits. If we are talking about certain types of goods, for example, dual-use goods or weapons, an additional license for foreign trade is required. The bank servicing the parties, logistics specialists, lawyers, economists, customs brokers and in some cases even interpreters are chosen.

Today the market is rather formed. Leaders that have been successfully operating in this segment for many years have been identified. Specialists will take into account all the peculiarities of foreign economic activity, provide general or highly specialized consulting services. Payment terms, insurance, possibility of withdrawal of funds without agreement with the bank or suppliers are agreed in advance. All these moments are fixed in the contract, which specifies details of the parties, the actual and legal address, other contact information, numbers of licenses and other permits, based on which is the service of foreign economic activity.

 

Людмила Логистик УКР

Эксперт в сфере транспорта и логистических процессов НАН Украины. Участница экспертной рады при министерстве транспорта и инфраструктуры

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